How do you feel about renting forever? I'm in this debate, and, for me, it's all about renting. Here's how to decide where you should land in the rent vs. buy debate.

 

depositphotos

 

Almost 10 years ago, I went from being a homeowner to renting again. (I was still married and my son was in middle school, but that's a whole other financial lifestyle discussion.) At the time, I was convinced that I would probably never want to buy a home again.

People insisted I'd change my mind.

I haven't. In fact, I doubled down in a very public way. By sharing my thoughts with The New York Times. I continued my tour de force with a first-person overview of renting forever for Newsweek.

Both of these pieces look at different aspects of renting forever: the financial and the lifestyle. Let's break it down.

 

Lifestyle Considerations Of Renting Forever

Part of my deal is creating a lifestyle I enjoy. It's a two-parter:

1. A freelance career and lifestyle I've cultivated over nearly 20 years; and
2. Using investing as a way to meet long-term and short-term lifestyle goals.

Renting fits into my lifestyle because it reflects my values and is compatible with how I create my desired lifestyle.

 

Value: Freedom

Freedom represents my most important value. Renting provides a great deal of freedom:

• Ability to leave with shorter notice, and without worrying about selling or otherwise dealing with my home.
• Not responsible for the repairs, maintenance, and upkeep of the home structure.
• Living in an apartment on the third floor means more freedom to travel without worrying about who's watching the house.
• Time freedom from all the things—yard work, cleaning, etc.—that come with owning a home.

When I owned a house for seven years, it started to feel more like an imposition. There was always something that needed doing. I was at the mercy of the house. There were things we couldn't do because of homeownership. And if we decided to do some things, it required advanced preparation.

Renting offers much more freedom in the way I prefer it. Some homeowners like the freedom of completing projects, setting things up their way, and not worrying about being told to leave. That's a kind of freedom as well. But it's not my kind of freedom.

 

 

Value: Flexibility

Much of the flexibility that comes with renting forever is related to the freedom value. But there is a lot of flexibility here. If I decide to pick up and leave, there's flexibility there. I don't need to try to sell anything. Or become a landlord. Or find a property management company. I can just … leave. There are costs with breaking a lease, but it's much easier than going through everything it takes to move out of a home you own.

Plus, the flexibility of the lifestyle means I can upsize or downsize with relative ease. Currently, I like living in my apartment. It's reasonably spacious with three rooms and two bathrooms. I used to rent a home. I liked it for entertaining, but I can still entertain in my apartment. And it fits my current needs. If I decide I want to rent something bigger later, I can without too much trouble. If I want something smaller (not likely), downsizing is simple. I could probably even stay in the same apartment complex.

I can also be flexible with many of my other plans. The apartment is a monitored complex on the third floor. So I can easily take off for a spontaneous weekend away. It requires little preparation for me to take a walk, meet friends, or leave time. With a house, there were steps to take before I could leave—especially for an extended period.

 

Value: Convenience

This is a big one. I love convenience. And renting forever is the epitome of convenience:

• Someone else takes care of all the repairs and maintenance. Changing lightbulbs and furnace filters. Hot water heater broken? I just text the maintenance line and it's fixed within half a day.
• Community amenities. Fitness room available. No driving to the gym (or paying for a membership). Walking path right here for a quick nature fix. Pool for a quick dip in the summer. Year-round hot tub.
• Near my favorite places. I'm renting close to downtown, where I spend most of my time with entertainment and friends. It's even walkable. I like living closer to the action instead of being farther out in a suburb.
• Easy to care for. Even though my apartment is smaller than a home, I still hire a house cleaner. It takes her about 1.5 hours to get everything squared away each week. My patio is simple to keep nice, with flower pots and a small trellis for a climbing plant. Gives me that touch of beauty without the need for a yard.

Owning a home was inconvenience after inconvenience. My life is much more convenient now.

 

Value: Simplicity

Finally, I value simplicity. Apartment living practically requires simplicity. Travel and experiences matter to me more than things, so there aren't a lot of things in my life regardless. But if I decide to buy something, I have to think about it. Where will I put it? I don't pay for a storage unit for my stuff. If it doesn't fit in closets or my garage (with room for my car), I don't get it.

Everything from limiting the dishes in my kitchen to the plants I have on my balcony/patio contributes to my simple life. Plus, I don't have to worry about taxes, escrow, utilities, etc., etc., etc. Homeownership added a lot of complexity to my lifestyle. My bills as a renter are pretty simple. Even my internet is included with my rent payment.

 

Financial Considerations Of Renting Forever

The New York Times article focused a lot on the financial aspects of renting. How do you build a secure financial future if you don't have the forced savings associated with building equity in your home?

While it didn't make it into the article, I did send some follow-up information to the writer (she did a fantastic job) about my process of growing wealth as a renter:

Basically, it's about figuring out your priorities. I make sure the rent is paid, and I invest in retirement. Those are two of my top [financial] priorities. It's the same if you have a mortgage. You make sure the mortgage is paid, you order your other bills. I do the same with my renting. I have a housing payment, utilities, retirement contributions, insurance, groceries, entertainment. All those things. It's just that my housing payment is rent instead of a mortgage.

The house you live in comes with plenty of costs over time that reduce your total “profit” when you sell:

• Interest on the mortgage
• Property taxes
• Homeowners insurance
• Maintenance
• Repairs (especially as the home ages)
• Utility costs are usually higher in a home than an apartment

Even if you pay off your mortgage early, these costs can still reduce your overall profit. Sure, your home might have appreciated, but did it appreciate enough to overcome these costs PLUS inflation? Do you really end up with a better return than if you just dollar-cost averaged into the market?

 

What About Rent Increases?

Unless you live in a place without property taxes, you could end up paying extra anyway. When asked about rent increases, this is what I replied:

I had stable rent for three years, and then last year it went up 4%. My rent next year will go up 2%. So I just factor that in. During the time I had a home, my property taxes increased between 2% and 5% a year, depending on my home value. Right now, in Idaho, with our homeowners exemption capped, some people are seeing property tax increases that amount to my increase in rent—or more. For example, in the last 5 years, my rent has gone up by $350 total. Property taxes on the median home value in my area have increased by about $357 total. So my increases are in line with what someone paying property taxes in my area are seeing.

Just like any other scenario, I plan for inflation and invest accordingly. This would be the same whether I owned a home and had to account for property tax increases and other homeownership costs, or whether I continue to rent forever.

If I owned a home, because of my lifestyle preferences, I'd be paying for yard care, a higher price for house cleaning, and I'd have to pay for snow removal. I'm not doing those things myself. My utilities in this apartment are less than $100 on an expensive month. In a house, they'd be double that—and I'd have to pay for high-speed internet service.

 

Deciding Where You Fall In The Rent Vs. Buy Debate

Renting forever isn't for everyone. It's my preference because of my financial and lifestyle priorities. As you decide where you fall in the rent vs. buy debate, here are some things to consider:

 

Why Do You Want To Buy A Home?

The first step is figuring out why you want to buy. As I mentioned in the NYT article, people think it's weird that I have no desire to buy a home.

 

 

After all, we're supposed to scrimp and save until we can “afford” this vital part of the American Dream. It's part of that “natural progression” of adult milestones. Go to college, get married, buy a house, have kids, maybe someday retire.

So start by asking why you want to buy a home. Do you really want to own one? Is it compatible with your lifestyle? Or do you just assume you must do this thing because you're supposed to do this thing?

(If you're trying to get a handle on your financial priorities, consider buying my mini-course on setting financial priorities so you can design a life you like living. It's only $2.99 and takes you step-by-step through the process I use to determine how to use my financial resources.)

Many people like the idea of homeownership and the lifestyle that comes with it. They like the idea of a home for their children. Taking care of a big yard. Having a relatively stable place to stay. Doing projects. Using home equity as a forced savings mechanism they can draw on later.

These are all valid reasons to buy a home. But get clear about your values and your lifestyle preferences to make sure you know why YOU want to buy instead of rent.

And realize that it's ok if things change and you decide to rent later. Or buy after you thought you'd rent forever.

 

What's The Purpose Of Owning A Home?

Buying a home and investing in real estate are two different things. In general, many financial professionals, money wellness experts, and others point out that buying the house you live in might not be the best investment, in terms of straight financial ROI.

Real estate investment, on the other hand, is about owning an asset and generating cash flow. The home you live in represents an expense. You're paying interest, property taxes, and other costs. You're not generating ongoing cash flow. And, unless you live in very specific places in the country, your annual appreciation probably won't make up for these costs in the long run.

Sure, you might have a large chunk of capital when you sell later, but that's not the same as a profit.

If you want to own the home for a short while, and then rent it out, it can make sense. Perhaps you decide to house hack to start a real estate empire designed to provide you with ongoing income.

Some people purchase real estate for rental income and long-term investing but rent the home they live in. This is an interesting approach. It recognizes that where you live isn't an investment. But you can rent and still invest in real estate, diversifying your portfolio.

Figure out the purpose of the home, and plan accordingly.

 

Bottom Line

Once you know what matters most to you and take a look at the numbers, you're better prepared to make a decision based on your priorities and individual financial situation.

Don't let someone tell you that buying or renting is definitely better. And don't assume that renting is always throwing money away, or that buying a house when rates are high is a bad idea.

Ultimately, where you live is about priorities, values, and lifestyle. As long as you're honest about what you're doing and it works for you, either choice can be the right one.

---

More By This Author:

3 Things You Can Do To Become A Better Investor
The Truth About Credit Scores
How To Determine Your Investing Priorities